HARLINGEN, RGV – One of Eddie Treviño’s first acts as Cameron County Judge was to preside over a commissioner’s court meeting where the commission voted unanimously to approve an exemption of its Freeport tax on warehouse inventory.
Treviño predicted at the time that adopting a freeport exemption tax would lead to more economic development in his county. On Monday he was proved right as Cardone Industries, beneficiaries of the tax exemption, held a groundbreaking ceremony for a $50 million, 920,000-square-foot distribution center in the Harlingen Industrial Park. The center will hire between 500 and 750 new workers.
“The freeport was a critical component of our decision. That was an amazing process to work through. It will be a huge benefit to us, going forward,” said Michael Cordone, III, executive vice chairman of Cardone Industries.
Cardone Industries was co- founded by Michael Cardone, Sr. and son, Michael Cardone, Jr., in a small row house in North Philadelphia. “The year was 1970, and their niche was remanufacturing a single product line; windshield wiper motors. Over the years, the company has grown, now offering over 90 product lines and 46,000 SKUs of automotive hard parts, the About Us page on company’s website states.
Cardone Sr. was inducted into the Automotive Hall of Fame in 1994, for his pioneering excellence in remanufacturing. His company has grown into one of the largest privately-held automotive parts remanufacturer in the world. It employs over 5,000 workers at facilities in Pennsylvania, California, Texas, Mexico and Canada. Cardone Industries has a maquila in Matamoros that hires almost 3,000 workers. It has sorting centers in Brownsville and Harlingen.
When he laid out the case for a freeport tax exemption plan for Cameron County, Treviño pointed out that the exemption of taxes applies to goods that have been acquired in or been imported into Texas that will be forwarded out of the state within 175 days. The freeport tax exemption started in January 2018.
“Cameron County has opted to not exercise its authority to impose the freeport tax. In doing so, we have created an economic development tool,” Treviño said at the time.
A news release issued by the County provided examples of the savings for companies. In Harlingen, about $107 million in warehoused inventory would qualify for the tax exemption resulting in a savings for companies up to $417,000 annually. Brownsville companies qualifying for freeport goods tax exemptions have almost $250 million in inventory. This could represent up to $975,000 in savings for Brownsville-based industries. San Benito and Los Indios based companies could qualify for up to $500,000 in savings based on their 2016 inventory levels.
“In the past, we’ve seen companies located in “triple-freeport” communities expand their operations and hire more people because of the savings in taxes,” Trevino said. “We have also seen how these communities are much more competitive in attracting new investment and we are confident that this will happen in Cameron County. This exemption, coupled with a low tax rate among Texas counties, places Cameron County at a very competitive advantage in attracting industry.”
A triple-freeport is when three taxing entities combine to offer a freeport tax exemption. This is what happened in the case of Cardone Industries, with Cameron County, the City of Harlingen and Harlingen CISD providing the incentive in order to lure the manufacturing company to Harlingen.
“Cameron County played a big part in this by adopting the freeport tax exemption about a year ago,” said Raudel Garza, CEO of Harlingen Economic Development Corporation, in an interview with KURV Radio. “This was an added bonus for Cardone. It put another check point on their list. Cardone has over $100 million in inventory in both Brownsville and Harlingen, in their sorting facilities. The finished goods that go outside the state will qualify for a freeport exemption, by school district, city and county.”
Garza explained that in the case of a triple freeport, three tax entities agree to exempt inventory from taxation that is in a warehouse for 175 days or less and goes out of state. “It basically makes it tax free,” Garza told KURV Radio.
Both Garza and Treviño joined Cardone at the groundbreaking ceremony. Treviño ran through some of the key statistics about the project: 500 to 750 employees; a one-year timeline for construction, with operations beginning in the first half of the year while construction continues; almost 1,200 direct or indirect jobs; approximately $327 million in salaries; over 400 new city residents to Harlingen, over $127 million in sales of taxable purchases; $5 million in new residential properties; over 100 new students to Harlingen CISD and over $237 million to be added to the county tax rolls.
“This is absolutely a win-win and big development not only for Harlingen but for Cameron County and South Texas,” Treviño said.
Cardone III said: “We are ecstatic to be here. This will be our large distribution center for North America. We will be able to ship to all over the country to support our customer base. It is 920,000 square-feet. We are just excited about bringing this to the Valley and bringing it close to all our operations. We see a ton of efficiencies when we have everything close by. All of our finished goods that we produce in Matamoros will come to this area. From this distribution center, the goods will be shipped out to our customers.”
Asked how many jobs would be created at the new distribution center, Cardone III said: “By the end of 2018, once we are up and running at full steam we see anywhere in the neighborhood of 500 jobs, plus or minus. It could be up to 700 jobs, depending on the custom we see and the growth we see in the next couple of years.”
Asked why his company chose Harlingen, Cardone III said: “We were looking at many locations, the mid-west, here in the south. With the support of the town, this was the place. It was a multitude of things. From the tax abatement, to the location, to the people, to our experience, to the relationships we have here. It was a multitude of factors that led us choosing Harlingen.”
State Sen. Eddie Lucio, Jr., was also at the groundbreaking ceremony. He said: “It is going to bring hundreds and hundreds of jobs. Potentially, rising to 1,200 direct and indirect jobs in the coming years. This is a major investment when you are talking about $50 million and close to a million square feet of space. I am excited for Harlingen and the whole region. The impact will be regional.”
Asked if Lucio’s projection of 1,200 direct and indirect jobs, Lucio said: “That sounds about right. There are other add-on and lead-on jobs, and support around the distribution center that will bring other jobs to the area as well.”
Harlingen EDC’s Garza was asked by reporters about the impact of Cardone’s expansion.
“Let’s put it in perspective. The Harlingen industrial market is about two and half million square feet. Six hundred and fifty thousand of it is already occupied by Cardone and their existing sorting facility. We are about to add on almost a million square feet more. That is about 30 percent more in industrial space to the city of Harlingen, with just one project. That is basically the size of the Houston Astrodome. It is more than 20 acres under roof. It is 48 feet high in terms of the ceiling. It will have hundreds of truck doors.”
Asked about the skill level employees will need to work at the new distribution center, George Zauflik, Cardone’s senior vice president for compliance and governmental relations, said: “Primarily a high school diploma but we have jobs that don’t require a diploma but a GED. We will also have up to very technical positions, with engineering degrees, business analyst degrees. The key thing about re-manufacturing is it is labor intensive, that is why we have a few hundred people in our existing Harlingen facility.”
Zauflik added: “This distribution center will facilitate customers in the southern half of the United States, between Mexico, the U.S. and Canada, and our west coast locations. This is an expansion. We have distribution centers in Canada, Los Angeles, Dallas and Philadelphia. This is our newest and largest distribution center.”
Harlingen Mayor Chris Boswell said: “Christmas has come a little bit early here in Harlingen. I can tell you no group of children has waited with any greater anticipation than a lot of us here under the tent, those of us who have been working on this project so diligently for the last couple of years to see a really wonderful thing happen for our community and all of South Texas and Cameron County and the City of Harlingen.”
Editor’s Note: The main image accompanying the above story shows Mark Shasteen, executive vice president for global operations for Cardone Industries and George Zauflik, senior vice president for compliance and governmental relations for Cardone Industries.